Zenith Sees No Hdtv Ok Till '94

May 05, 1993|By Jon Van.

Recommendation of a broadcast standard for high-definition television apparently won't come until next year, Jerry K. Pearlman, chairman of Zenith Electronics Corp., told shareholders at the firm's annual meeting at its Glenview headquarters Tuesday.

Testing of the first of four competing systems will begin later this month. Talks among the competitors to join forces in one grand alliance have failed to produce agreement so far, Pearlman said.

If no agreement is reached by July, it is likely no grand alliance will occur and testing of the competing systems will continue until December, he said.

In the first round of testing, which ended last year, none of the four digital systems was deemed good enough to become the standard by an industry group advising the Federal Communications Commission.

In February, when the advisory committee to the FCC opted for more testing, committee members thought it could be done quickly enough so a decision could be made before year's end. Testing will take longer than expected, Pearlman said, because technical experts have concluded they cannot merely test components that have been improved within the system, but must retest each system in its entirety at a cost of about $800,000 per entrant.

"They decided that if you make some changes in part of a system, it could have an effect on other parts that you didn't change," Pearlman said. "So the testing will be more extensive than we first thought."

Pearlman said Zenith and its partner, American Telephone & Telegraph Co., have improved their system to the point where they believe it is good enough to become the standard and is, in fact, better than its competitors, which include General Instrument Corp. and the Massachusetts Institute of Technology as well as the North American arms of Thomson Electronics, a French firm, and Philips, which is Dutch.

The Zenith-AT&T system won't be tested until this fall, which gives it something of an edge.

"We'll be working on it to improve it right up to October," Pearlman said.

Zenith, which lost almost $22 million in the first quarter of this year, is counting heavily on high-definition television to help it achieve profitability again. The system accepted as the standard for high-definition television will earn its developers money through royalties on each set sold using the new technology. But Pearlman said that whatever system is selected, Zenith plans to build sets to that standard.

He said the firm expects to make significant profits on high-definition sets that will sell for $1,000 to $1,500 more than today's big-screen TV sets. Total technology royalties on each set probably will be less than $20, he said.

The firm hopes to begin selling large-screen high-definition sets in 1996. At present, big-screen sets are a fast-growing segment of industry sales, Pearlman said. Based on this trend, Zenith expects that in the first three years they are available, some 3 million to 5 million big-screen high-definition sets will be sold in North America. Once the high-definition TV standard is set, it will take time for companies to design and make the integrated circuits needed to process the digital signals that underlie the new technology.

Pearlman said that as soon as the standard is known, Zenith will likely start making its big-screen sets so that high-definition circuits can be added to them in the future. This would assure people who are spending $2,000 and more for a big-screen set in 1995 that it won't become obsolete in a year or two, he said.

Even though Zenith doesn't expect to turn a profit this year, it does expect better performance in the second half of the year as new TV models come into the market and as cost-cutting measures take effect, Pearlman said.

Most discussion at Zenith's annual meeting concerned working conditions at the firm's assembly plants in Mexico. Several shareholders representing religious organizations had asked that Zenith prepare a special report on working conditions, an action that Pearlman and his board opposed.

These shareholders were accompanied by three of Zenith's Mexican workers who alleged bad pay and dangerous working conditions.

Pearlman said the firm had heard the allegations before and that they are untrue. He conceded that wages in Mexico are low by U.S. standards, and said that is why Zenith built plants there. He added that Zenith's Mexican workers are paid wages competitive with those paid to workers at TV plants in Mexico owned by Zenith competitors.